General CDC Statement for the Business & Human Rights Resource Centre Newsletter
“CDC exists to make a difference to people’s lives in some of the world’s poorest places by building businesses and creating jobs. Without CDC’s investment Feronia would not have survived and 3500 people would have lost their jobs, as well as the access to the schools, hospitals and infrastructure that the company provides to workers and the community. In the first 18 months of our investment we’ve met our top priorities of helping the company secure its immediate future and deliver improved pay and benefits for all of its workers.
“We’re now focusing on helping the company use US$3.6m of our investment to deliver better environmental and social standards for workers and local people. This will include improved community engagement and environmental practices, upgraded community facilities, such as clean drinking water, and better workers’ housing and sanitation. As with many of the companies we support, we’re helping Feronia make improvements to the way it operates but this takes time.
“We have studied the Grain report closely and we welcome the interest that NGOs take in our investee companies. We’re also happy to meet NGOs and others to discuss Feronia and our other investments. If there are things going wrong of course we don't turn a blind eye - why would we; we want to make sure things are done well.”
What exactly is CDC doing to help Feronia raise standards?
CDC has been invested in Feronia for a little over 21 months – in that time we have provided the company with the capital to keep it afloat. This has helped preserve the jobs of 3500 direct employees and many thousands more who are dependent on Feronia’s contracts and supply chain. When we invest in a business we work with the management to ensure that they raise standards. We’re doing this with Feronia.
US$3.6m has been ring-fenced to support the company to strengthen business standards and enhance community facilities (through an environmental and social action plan). CDC is supporting Feronia in the implementation of the plan as well as by chairing the environmental and social sub-committee of the Board. In practical terms the plan includes, but isn't limited to:
•refurbishment of the housing and sanitation available to workers;
•a road maintenance program to update the infrastructure on Feronia land that all local people can use;
•appointing new health & safety staff and community relations managers;
•undertaking a comprehensive study of the needs of workers and the local community;
•a new grievance procedure for workers and community; and
•land mapping to clearly mark out where the company's land extends, .
CDC is also supporting the management to secure Roundtable on Sustainable Palm Oil certification.
CDC’s response to the specific allegations in the Grain report:
On land rights:
PHC, which is Feronia’s palm oil business in the Democratic Republic of Congo, operates on land which is leased from the DRC government by way of over 80 fixed-term ‘concessions’. Feronia strictly abides by the legal process in place for renewing these concessions, including obtaining the necessary government permissions. Many of the concessions have been in place for over 100 years and the renewal process has been undertaken a number of times.
Throughout its long history the company has generally enjoyed the support of local communities and the DRC government. Where issues relating to land are expressed by local communities, whether they are legally valid or not, Feronia tries to engage with those communities to assist in achieving a fair solution within the bounds of the country’s land laws. The company is currently working in collaboration with a local NGO on a digitisation exercise in order to achieve an accurate and upto date mapping and demarcation of the concession area.As Feronia works towards RSPO certification it will make public all relevant information regarding its concessions.
It is clear that there were numerous documented issues with traditional communities in the early years of Unilever and its predecessor companies’ presence in the DRC. However, the challenges facing Feronia today in revitalising the business are quite distinct from the issues caused by Unilever’s early activities in the region. The company does not dismiss those historical issues but is focused on the reality of the situation inherited after nearly a century of operation in these locations.
What is CDC doing more generally on land rights related to its investments?
• CDC assesses all transactions that involve significant land acquisition, whether for food production or other uses, as high risk and applies IFC Performance Standards to each. CDC also puts in place environmental and social action plans and appropriate grievance mechanisms while continuing to actively assess this issue.
• We have also produced guidance for our fund investors to encourage their own good practice – we jointly developed a good practice paper, ‘Land in Investment’, with the Earth Security Initiative in 2013.
On Wages:
When Feronia took over the company from Unilever in 2009, it inherited the wages and benefits policy that were in place at the time. Given the dire situation facing the business at the time, the priority was to maintain jobs and as such it committed to a no redundancies policy and also honoured all previous commitments made by Unilever including retirement payments and unpaid wage claims related to the war years.
Nevertheless, it is clear that wages were insufficient and so following CDC’s investment in 2014, the company, which is fully unionized, entered into negotiations with the four trade unions that represent the workers to update the terms and conditions of the employees for the first time since the mid-1980s. This resulted in an immediate increase in average wages of 70% with the average wages on the plantations being increased to c.$4/day. As well as wages, employees receive overtime, maternity pay, holiday pay, end of service pay, bonuses and assistance towards school fees as well as free housing and healthcare for themselves and their families.
A further improvement is anticipated in 2016 and the company is committed to continuing to improve the pay and conditions over time as the company reaches financial sustainability – sadly the company made a loss of almost $20m in 2014 although CDC remains optimistic for the future of the company and its workers. By 2016 all workers will receive at least a basic salary at minimum wage level, in addition they will receive benefits outlined above.
On Community relations
CDC takes any allegations about community harassment very seriously. The company’s operations are subject to the same laws, legal systems and policing as the rest of the DRC. In addition, the company has in place awhistleblower policy and is currently engaging a third party to develop a community grievance mechanism.
In 2014 the company commissioned an independent third party to undertake a comprehensive assessment of the environmental, social and community relations of its operations – this involved visiting hundreds households and is expected to report over the next few months. It will be published and will be the basis for the company’s community development plan. The company is currently in the middle of putting in place a community development team who will oversee implementation of this plan.
On corruption allegations relating to Barnabe Kikaya Bin Karubi:
The company has adopted anti-bribery and anti-corruption policies in line with CDC’s own investment policy. We take any allegations of corruption extremely seriously and have mechanisms in place to investigate them.
With regards to the specific allegations relating to the role of Barnabe Kikaya Bin Karubi (the former Congolese Ambassador to the UK), he was part of the original team that worked on the acquisition of the plantations in 2009. This process was done through a competitive tender process run by KPMG (Paris) on behalf of Unilever plc.
Alongside some of the other initial investors and directors he received a number of shares in this original company – Mr Karubi has never lobbied the government of DRC on behalf of the company and at the time of his being involved in the creation of the company in 2008-9, he held no government post.
The only cash received by Mr Karubi related to his role as a Director on the board (which he did unpaid 2009-12 and then paid in line with all other directors from 2012-14) and related to the fact that the company leased Mr Karubi’s residence in Kinshasa for use by the company as a guest house and office space – in order to reduce the cost of hotels for visiting staff. Upon Mr Karubi’s return from London to Kinshasa the lease was ended. Mr Karubi left the board of the company in 2014, shortly after CDC’s investment. All of the transactions related to Mr Karubi have been published by the company as per its disclosure requirements.